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Subject:  Re: Figuring Tax Implications of IRA Conversions Date:  1/31/2007  11:39 AM
Author:  ziggy29 Number:  91513 of 131768

>> On 4/21/03, I had an traditional IRA worth $30,700. In December 2006, I converted it to a Roth and it had a value of $51,600. The difference between those two numbers is pure profit.

The problem, though, is that I don't know:

(1) how much of the initial $30,700 is contribution vs profit.

(2) how much of the contribuion was made with after-tax dollars.

Sounds like you converted an IRA with commingled assets (pre-tax and after-tax).

I'll simplify this a bit, assuming I understand tht situation correctly. All you really need here is the answer to number (2), because the taxable conversion amount is just the value at conversion ($51,600) minus the amount of nondeductible contributions which have already been taxed -- in other words, all the value in the original IRA which has not yet been taxed.

As for the answer to (2), if you've commingled assets you (or your tax preparer in this case) should have filed Form 8606 in any year you added to a position in an IRA with commingled assets. Did your tax preparer know about this situation? If so, he/she definitely should have filed the 8606 with the appropriate returns.

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